From now on, interstate landlords and their tenants cannot use the NSW Tenancy Tribunal (NCAT)

In a significant decision which forces interstate landlords and their tenants to use the NSW Local Court or District Court to determine tenancy disputes under the Residential Tenancies Act 2010 (NSW), the NSW Court of Appeal has ruled that it is unconstitutional for the Civil and Administrative Tribunal of New South Wales (NCAT) (the Tribunal) to hear disputes between interstate landlords and their tenants.

The decision is Attorney General for New South Wales v Gatsby [2018] NSWCA 254 (6 November 2018). The significance of the decision is reflected in the strong bench: Bathurst CJ, Beazley P, McColl JA, Basten JA & Leeming JA. Bathurst CJ delivered the leading judgment, the other justices agreeing on the orders, some with additional comments.

In this article we analyse the decision, and the consequences.

The facts

The Court of Appeal considered two ‘test case’ appeals from the Appeal Panel of the Tribunal:

1. Ms Berri Gatsby, a resident of Queensland, owned residential premises at Terranora, just south of the border between New South Wales and Queensland. She applied to the Tribunal under s 87(4) of the Residential Tenancies Act for a termination order for non-payment of rent and an order for possession against her daughter, Ms Deva Gatsby, who was the tenant.
    
2. Ms Dibbin, a resident of Queensland, owned residential premises just south of Tweed Heads in New South Wales. She applied to the Tribunal under s 175 of the Residential Tenancies Act for compensation for the cost of cleaning and repair of damage out of the rental bond, while the tenant, Ms Johnson, applied for repayment of rent under s 45 of the Act and a refund of the rental bond because the premises were uninhabitable due to “serious mould”.

The consideration: the Constitutional Issue

Under s 39(2) of the Judiciary Act 1903 (Cth) “Courts of the States” are vested with jurisdiction to determine “all matters … between residents of different States” under s 75(iii) of Chapter III of the Constitution (Cth).

The Court of Appeal determined two questions:

1. Whether the Tribunal was “exercising judicial power” in making an order to terminate a residential tenancy agreement? And if so,
    
2. Whether the Tribunal was a “court of a State” which was invested with federal jurisdiction to determine maters between residents of different States?

In answer to question 1, the Court of Appeal decided that the Tribunal was “exercising judicial power” by exercising these functions:

• In determining the existence of a residential tenancy agreement, whether it was breached, and whether the breach was sufficient to justify termination under s 87(a) of the Residential Tenancies Act; and
   
• In exercising the power to enforce its orders under s 121 of the Residential Tenancies Act.

In answer to question 2, the Court of Appeal decided that the Tribunal was not a “court of a State” because of a combination of these factors under the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act):
 

• The Tribunal is not designated as a “court of record”;
   
• The Tribunal is not comprised “predominantly” of judges, its members consist of lawyers and non-lawyers, many of whom are part-time;
   
• There is no security of tenure for members of the Tribunal in that they are appointed for fixed terms;
   
• Members can be removed from office more easily than judges can be removed.

Therefore, the “minimum requirements of independence and impartiality” are not satisfied, and so the Tribunal is not to be treated as a ‘court of a State”.

The consequences

The decision has broad consequences, not only for residential tenancy disputes.

According to Basten JA:

NCAT has jurisdiction conferred on it by some 146 State statutes. It disposes of about 67,000 applications a year. The Appeal Panel stated that “hundreds of Tribunal matters each year are between parties who are individuals resident in different States”. Similar figures will apply to other State tribunals, such as VCAT and QCAT. [paragraphs 275 & 276]

Some State statutes, such as the Residential Tenancies Act provide that proceedings can only be commenced in NCAT. Section 119 of the Residential Tenancies Act provides:

A landlord or former landlord must not commence proceedings against a tenant or former tenant of the landlord in the Supreme Court, the District Court or the Local Court to obtain recovery of possession of residential premises subject to a residential tenancy agreement.

It was for this reason that Ms Gatsby and Ms Johnson instituted their proceedings in NCAT.

The NSW Government has decided not to make the Tribunal a court, unlike in Queensland, where QCAT has been designated as a court to overcome the constitutional issue.

Instead, it has introduced an exemption from section 119 for interstate litigants. They are able to institute Residential Tenancies Act proceedings in the Local Court or the District Court of NSW according to the procedure set out in new Part 3A of the NCAT Act, titled “Diversity proceedings” which was inserted in anticipation of the constitutional issue being decided in this fashion.

This right applies not only to landlords with disputes under the Residential Tenancies Act, it also applies to interstate litigants who are litigating under other statutes.

In maintaining the status of NCAT as a tribunal, the NSW Government has recognised its utility for resolution of disputes “outside the formal court structure” and for resolving “the real issues in proceedings justly, quickly, cheaply and with as little formality as possible” (see s 3(a)(b)&(c) NCAT Act).

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